ECON 120B, SPRING 1998  --  HOMEWORK #1


This assignment is due no later than 12:45 pm on Tuesday, April 28, 1998
(late papers will have a 25% penalty PER DAY).  It will carry a weight of
5% towards the grade.  As before, team up with one or two more persons,
do each problem individually (otherwise you won't be well prepared for
exams), but submit a joint paper with all your names (max 3).  You are
not allowed to add your name later.  If you try to do that, I will
consider it a blatant attempt to cheat and give you zero points for the
assignment AND THE SECOND MID-TERM EXAM.  If your name appears on more
than one paper, the LOWER score will be recorded.


Do Exercises 3.9, 3.17, and 3.27 of the fourth edition.  In the third 
edition, the first two correspond to Exercises 3.4 and 3.14, but there 
is no corresponding exercise to 3.27.

A grocery store has found from past experience that sales have averaged 
$16 per customer and can be taken to be normally distributed.  The store 
manager decided to introduce special club cards using which shoppers can 
get discounts on merchandise.  After a few months the manager found from 
a random sample of 25 customers that the average sale during the 
promotion period was $19 with an estimated variance of 25.  Would you 
conclude (at the 5 percent level of significance) that the club cards 
have significantly increased the average sales?  Carefully specify the 
hypothesis you are testing as well as the alternative.  Also derive the 
95 percent confidence interval for average sales.